An assessment of direct-to-consumer (DTC) pharmaceutical advertising spending

Yunjae Cheong

Hankuk University of Foreign Studies

Kihan Kim

Seoul National University

Introduction

Advertising financial efficiency, perhaps, is the most important issue for advertisers (Smith & Park 1992). This is because inefficient advertising media spending and a misallocated media mix can easily result in lower profit margins and prevent a firm’s business growth (Danaher & Rust 1994). In this study, a financial efficiency analysis is performed for the direct-to-consumer (DTC) pharmaceutical industry as a test case. Such an attempt is in response to the rapid growth in DTC advertising by pharmaceutical companies following the deregulation of the US Food and Drug Administration (FDA).